'Secret battle for America' fought far from the front lines during World War II -- Lost documents find British agents took on Nazi sympathisers in the US -- Crew headed by Donald MacLaren destroyed Hitler's plan for empire
It was fought through the political salons of Washington DC, the boardrooms and the smoky nightclubs of New York.
The protagonists had no uniform save that of a well-tailored suit; their weapons were native cunning, a plausible manner, and, from time to time, a concealed revolver.
This was the secret battle for America, ordered by Winston Churchill himself, and the fate of the free world hung upon it.
Today, we can reveal the untold story of how British agents went to war on Wall Street, a story pieced together from a remarkable collection of secret intelligence reports lying untouched for decades.
Uncovered by the MoS, the documents show how British agents took on Nazi sympathisers in the US with a masterful campaign of dirty tricks and disinformation, how they outmanoeuvred Hitler’s network of American allies and how they, ultimately, destroyed the Third Reich’s powerful business and intelligence empire across the water.
Today, amid talk of special relationships and historic links, few remember that a sizeable part of American opinion was pro-German, even as Europe burned – or that many well-placed Americans were virulently anti-British.
There was a strongly held belief, particularly in corporate and financial life, that the Nazis were the best bulwark against the advance of Communism.
In fact, America and its vast industrial output were vital for the Nazi war effort. German companies ran extensive US subsidiaries and supplied the Third Reich with pharmaceuticals, chemicals and the latest technology, directly or through South American subsidiaries.
The Third Reich needed information, too. Long before the outbreak of war, German firms had placed networks of deep-penetration agents across the American business world.
There was open sympathy for the German cause and it extended to the very top of American society.
Sullivan & Cromwell, a powerful New York law firm, brokered numerous deals between American business and the German companies that helped bring Hitler to power.
The partners included John Foster Dulles, who later became Secretary of State, and his brother, Allen Dulles, America’s wartime spymaster, who became the first head of the CIA.
Standard Oil, founded by the Rockefellers, was entwined with IG Farben, Nazi Germany’s most powerful conglomerate. Brown Brothers Harriman, the oldest private bank in the United States, was connected to Fritz Thyssen, the German steel magnate who had financed Hitler.
Thyssen ran his American business through the Union Banking Corporation, based in New York. Its directors included Prescott Bush, father of President George Bush and grandfather of President George W. Bush.
Henry Ford, founder of the Ford Motor Company, was the author of the anti-Semitic pamphlet, The International Jew. He received a medal from Nazi Germany in 1938. Hitler kept a portrait of him in his office.
Vital support: Adolf Hitler in 1932 with German industry barons, including steel magnate Fritz Thyssen, right
All this, declared Winston Churchill, had to stop. The man charged with tackling the Germans’ formidable operation was Donald MacLaren, a Highland clan chief. Charming, persuasive and physically imposing, MacLaren was a skilled operative who established a network of 150 agents across the Americas in the early years of the War on behalf of British Security Coordination (BSC), the British intelligence organisation in the US. Working closely with George Merten, a German anti-Nazi, his mission was to report on Nazi-American business links.
By training, MacLaren was an accountant, a vital skill for industrial counter-espionage. But he was no grey man. A snappy dresser with a taste for good food, wine and cigars, MacLaren relished his time in Manhattan and entertained his contacts at 21, an upmarket restaurant a few blocks from the British intelligence HQ at the Rockefeller Centre.
Their enemy was IG Farben, the friend of Standard Oil. Born out of a merger between Bayer, BASF, Hoechst and Agfa, IG Farben was the largest and most powerful company in Europe and the biggest chemical conglomerate in the world, producing the basic components of a modern industrial state: explosives, film, plastics, fuel, rayon, paint, pesticides and much more. Including poisonous gases.
Without IG Farben, Nazi Germany could not wage war. Hermann Schmitz, its CEO, was one of Hitler’s earliest backers. IG Farben designed, built and ran the company’s concentration camp at Auschwitz, known as Auschwitz III, making Buna, or artificial rubber. Its managers oversaw tens of thousands of slave labourers in conditions of extreme brutality, forced to work until they died or were dispatched to the gas chambers to be killed with Zyklon B – a patent owned by IG Farben.
Hermann Schmitz was also a director of the mysterious Bank For International Settlements, based in Basel. The BIS, which still exists, was a key point in the secret channels between the United States and the Nazis.
Naturally, IG Farben went by a different name in America, operating as a company known as General Aniline and Film, or GAF.
Revealed: Donald MacLaren's 1942 pamphlet
And helped by its association with Standard Oil, GAF extended its tentacles into the heart of the business, legal and political establishment, sending diplomatic and industrial secrets – plus huge profits – back to Berlin. MacLaren, then, was facing formidable opposition, and not just from Nazi agents. The mandarins of the State Department were obsessed with maintaining America’s neutrality and they instructed J. Edgar Hoover, the head of the FBI, to refrain from any collaboration with Britain.
The powerful Irish and Catholic lobbies were violently anti-British, none more than Joseph Kennedy, US ambassador to London. A pro-Nazi lobby, the German-American Bund, boasted celebrity supporters, such as the aviator Charles Lindbergh. At its peak, the America First Committee, the most formidable isolationist lobbying organisation, had several hundred thousand members, including future President Gerald Ford.
MacLaren decided to use the same tactics as the Germans. He, too, became a fake businessman and, using an alias, claimed he wanted to establish a relationship with GAF.
His first attack was the work of a classic agent provocateur. The GAF directors, he discovered, were split into two factions over how they would protect their interests should America enter the war. MacLaren, who by now was close to a number of GAF board members, began leaking and fabricating information to set one faction against another.
This, he later said, resulted in one group racing the other to Washington to report the wicked activities of their colleagues to the Department of Justice. Each faction denounced the other as working for the Nazis; each was exposed.
MacLaren’s masterstroke, though, was a publicity blitz against IG Farben that finally forced the US authorities to take action.
It was in spring 1942, that BSC launched a 70-page pamphlet called Sequel To The Apocalypse, a taut distillation of MacLaren and Merten’s investigation of IG Farben’s American networks. Booktab, a BSC front company, published 200,000 copies, on sale at 25 cents, the striking cover featuring the four horsemen of the Apocalypse, one holding a torch aloft, whose smoke spelled out ‘IG Farben’.
The contents were explosive. They revealed, for example, the role of IG Farben in promoting the war, and the huge profits it was making from the destruction. It also detailed the company’s web of links with American household names, especially Standard Oil. With a foreword written by Rex Stout, a popular mystery novelist, it sold out immediately. Stout proclaimed that IG Farben’s American business partners were traitors, working for Nazi Germany’s interests.
For GAF and Standard Oil, the pamphlet was a public relations catastrophe. They immediately dispatched teams of employees to buy up copies. But it was too late. The US authorities felt obliged to act; IG Farben’s business empire in America was closed down and its subsidiaries placed on a blacklist. The US government also seized 2,500 patents from Standard Oil, on the grounds that they were owned by IG Farben.
This was a massive setback for Nazi Germany, as it could no longer use its American network to supply vital war materials.
Its US allies were named and shamed, causing a wave of revulsion – especially as, by now, the United States was at war with Germany.
In many ways, Donald MacLaren seemed an unlikely spy – and it is thanks only to a cache of yellowing intelligence papers that some part of this story has been retrieved. The BSC archives were deliberately destroyed after the war because they were judged too sensitive for the public gaze. But MacLaren was as stubborn as he was brave. He kept his papers.
Paradoxically, it was his upbringing as a son of the manse that aided his work as a spy. The teenage Donald helped out on his father’s parish rounds, sometimes even ministering to the dying. Warm and convivial, he had an unrivalled ability to get people to share their deepest confidences.
By 1938, MacLaren had moved to New York. His skills at forensic accounting made him a natural recruit for BSC. New York in 1940 was a magnet for Allied and Axis intelligence agencies. Its immigrant populations provided natural cover for spies. It was dangerous work. He once told his son, Donald, he had killed an enemy agent and interrogated many more, but would not reveal where or when. ‘But fortunately, I never had to torture anybody.’
MacLaren himself was keen to fight and obtained a commission with the Queen’s Own Cameron Highlanders but British intelligence refused to let him leave.
As the War ended, MacLaren went to Germany to build a legal case against IG Farben executives. He submitted a series of lengthy memos on the company and its leaders who, said MacLaren, embodied the dark nexus of German industry and the Nazi war machine. MacLaren argued, with remarkable foresight, that the way the Allies dealt with IG Farben would determine the economic balance of power in post-War Europe.
‘We are dealing here ... with denazification and demilitarisation of the heart and soul of the German war machine,’ he wrote.
In 1947, 24 senior IG Farben officials were tried for war crimes. Thirteen were found guilty. Their sentences were derisory. Hermann Schmitz received four years for ‘plunder’.
All IG Farben executives were released by 1951 on the orders of John McCloy, US High Commissioner for Germany.
Schmitz and his colleagues were warmly welcomed back to the German business world. The Cold War meant revitalising German industry was more important than punishing those complicit in mass murder.
IG Farben no longer legally exists. It was broken up into its constituent companies. But they are more powerful than ever. BASF is now the world’s largest chemicals company, with annual sales of almost €80 billion. Bayer is the world’s biggest producer of aspirin.
Donald MacLaren eventually moved to London, where he worked for the United Baltic Shipping Corporation, becoming a director.
In 1950, he stood as the unsuccessful Labour candidate in the Conservative seat of Kinross and West Perthshire.
He died in June 1966, aged 56, having never spoken publicly about his wartime role, the risks he took and the remarkable service he performed for his country.
In May 2009, I wrote an article for The Mail on Sunday about a US intelligence document that I had obtained, known as the Red House Report – an account of a meeting of Nazi industrialists at the Maison Rouge Hotel in Strasbourg in 1944.
They had gathered to plan the Fourth Reich and their domination of Europe through an economic, rather than military, imperium. Helen Scholfield, a MoS reader, contacted me.
Among her late husband’s papers, she had found several marked ‘Secret’ about British intelligence and IG Farben: the account of Donald MacLaren’s operation.
Journalist Bob Scholfield died in 2000 but without his diligent research, the story of how MacLaren destroyed the Nazi’s US economic empire might have lain buried for ever, one of a myriad of wartime secrets yet to be told.
Tower Of Basel: The Shadowy History Of The Secret Bank That Rules The World, Adam LeBor’s investigative history of the Bank For International Settlements, is published by PublicAffairs.